Fairness for Franchise Businesses and Workers

In California today, nearly 83,000 fast-food restaurants, convenience stores and other franchise businesses generate $94 billion in annual revenue and employ almost one million people.

In California, and in the rest of the nation, however, developments in franchise law in recent decades have increasingly reduced the power of franchisees in dealings with their corporate parents. The result has been lower franchisee profits and lower worker pay, while corporate profits and executive compensation soar.

Worse, the imbalance of power has been largely impervious to reform, until now. A bill in California awaiting the signature of Gov. Jerry Brown would strengthen the legal rights of franchisees in the operation, sale and closing of their businesses.

The bill prohibits the most egregious corporate practices, including the termination of franchises for minor violations of the franchise agreement. Such terminations can ruin a franchisee, but benefit the corporate parent, by allowing the corporation to sell the franchisee’s location at a higher price to a new owner. The prospect of swift termination also makes it easier to impose heavy corporate fees and other costs on franchisees, who fear losing their business if they protest. Those high costs, in turn, reduce the ability of franchisees to raise worker pay.

Mr. Brown should sign the bill. It was unanimously approved by the state Legislature, and includes compromises that were missing from a similar bill he vetoed last year. While franchisers would not have to reinstate a wrongfully terminated franchisee (as the earlier bill required), franchisees would be able to seek legal protection before being forced to give up a franchise and would be entitled to fair compensation for the franchise.

The Fight for $15 effort, begun by workers at fast-food franchises, has exposed unfair corporate policies that harm small businesses and impoverish workers. Union advocates for low-wage workers recently submitted a petition to the Federal Trade Commission asking for an investigation to determine the extent of abusive and predatory practices by corporate parents toward franchisees.

By signing the California bill, the governor would help in the drive to improve profits and pay at franchise businesses and show the federal government where it needs to go at the national level.

Governor Brown: What are you waiting for?

A version of this article appears in print on , on Page A34 of the New York edition with the headline: Fairness for Franchise Businesses and Workers. Order Reprints | Today’s Paper | Subscribe